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The stock market is offering a buying opportunity this month, according to Fundstrat's Tom Lee.
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This is because inflation is expected to fall “significantly” over the rest of the year, Lee predicted.
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He pointed to the lag in the consumer price index, with real-time prices beginning to decline in the economy.
Investors should buy stocks this month, as inflation is expected to reach level A Steep decline for the rest of the year, according to Fundstrat's head of research, Tom Lee.
Talking to CNBC Lee on Monday pointed to inflation figures for March, with prices rising more than expected for the third straight month in March.
But Lee said the higher inflation readings were largely due to a lag in official statistics. Real-time house prices and rents, for example, are “stabilityHe noted that housing inflation rose by 5.7% year-on-year in the official report for March.
Eventually, real-time price declines will catch up with the official inflation report. This is bullish for stocks, as lower price growth gives the Fed more room to cut interest rates and ease monetary policy, Lee said.
“I think inflation will decline significantly. I don't know when, but it will be sometime in the second half of this year,” he predicted.
Central bankers said at their latest policy meeting that they need more confidence that inflation will fall to its 2% target before considering cutting interest rates. Markets are looking at one or two interest rate cuts this year, according to the European Central Bank CME FedWatch tooldown from seven at the beginning of 2024.
But Lee suggested that Fed officials could give in to pressure to cut interest rates, especially when considering the impact of keeping interest rates too tight for too long. The risk of rising interest rates It pushed the economy into recession And spark market volatility, as investors, banks and consumers grapple with a High cost of borrowing.
“I don't think the Fed is comfortable with long-term interest rates at these levels. They're too high and, you know, they're putting a lot of pressure on regional banks…the cost of money is too high.” He said to me.
Lee is among Wall Street's most optimistic forecasters in 2024. Previously, he predicted The Standard & Poor's 500 Index could rise to 5,500 points By the end of the year, which means another 6% increase for the benchmark index.
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